SAN FRANCISCO/LOS ANGELES Aug 25 Amazon.com Inc tracked Twitch's evolution from scrappy guerrilla startup to one of the Internet's hottest media properties. On Monday, it announced a near-$1 billion acquisition to get into one of the fastest-growing online arenas: live-streaming video.
Amazon's $970 million bet - its largest ever - underscores how a loyal and fast-growing following for live-streaming video has grabbed the attention of big brands. Some believe live and interactive streaming, in which Twitch is a pioneer, is the new frontier in online video.
Bessemer Ventures' Ethan Kurzweil admitted on Monday that people gave him blank stares when he initially described Twitch to them. The San Francisco-based startup lets gamers livecast their play while responding in real time to cheers, tips and random musings from online viewers.
In three years, Twitch has become the fourth-largest U.S. producer of peak Internet traffic, ahead of Facebook and Hulu, according to Bessemer, a backer.
"It's a captive audience and one that is loyal," said Adam Shlachter, head of media activation at marketing agency DigitasLBi. "Where you have like-minded people ... all aggregated in one place, kind of holed up around the same thing and participating in the same experiences, that offers a really unique environment to target (ads) against."
Live streaming draws a following partly because of its immediacy: fans message their favorite personalities and can evoke a response during livecasts. Twitch and other live-stream networks such as Livestream also cater to niches, featuring content such as offbeat sports to videogames that mainstream outlets eschew.
Twitch had 55 million monthly viewers in July, up about 45 percent from a year earlier. That growth caught the attention of advertisers, who spotted the chance to reach younger viewers who watch less television.
Brands will spend $6 billion this year on digital video advertising in the United States, according to research firm eMarketer. Live events are appealing to advertisers because audiences can't skip commercials.
Most of Twitch's thousands of livecasters are simply gamers. Some boast a following of hundreds of thousands and earn a cut of ad revenue from the likes of PepsiCo's Mountain Dew and Time Warner Inc's Warner Bros.
YouTube, whose parent Google Inc was in talks to buy Twitch, streams some events live, but most of its videos are recorded. On live platforms such as Twitch, ads appear as a user opens a stream or when livecasters take a break.
"Interacting with celebrities and artists is a growing trend," said Max Haot, chief executive of Livestream.
Twitch is adding staff with expertise in programmatic ad buying, which uses computers to sell ads in real time, Twitch's chief revenue officer, Jonathan Simpson-Bint, told Reuters this month. That will give advertisers the option to insert commercials into Twitch videos that see a sudden surge in viewership.
It's also branching out into music events.
"Amazon has a direct media sales group of its own...I think our ad sales numbers will be accelerated by the fact that we are going to have access to resources of Amazon," Twitch chief executive Emmett Shear said.
Twitch's breakneck growth is now propelling the live streaming video format beyond gaming and pushing media companies and YouTube personalities to test it.
Discovery Communications Inc hosts a monthly Google+ Hangout with NASA scientists and Animal Planet live streams events such as the Internet Cat Video Festival in Minnesota. Discovery plans to invest in more interactive streaming events to help build a "two-way" relationship with viewers, said Sean Atkins, senior vice president of digital media.
Tom Cote, co-host of "Funny Stuff & Cheese," an independent online comedy series that streamed over a hundred shows live during its first season, says his fans like the fact that they can ask a question and get a response within minutes.
The format has its challenges. It takes creators time to find a groove and overcome technical glitches, Cote said. And there's no chance for editing or retakes.
"It will be widespread," he said. "Right now, I think people don't have the confidence to go live. It's a whole different beast than traditional video." (Reporting by Malathi Nayak and Lisa Richwine; Editing by Ken Wills)